The Internal Revenue Service is unable to verify taxpayer eligibility for the majority of the tax benefits and credits provided by the Recovery Act, according to a new report.

The Treasury Department’s Inspector General for Tax Administration found that the IRS cannot verify taxpayer eligibility for 13 of the 20 benefits and credits for individual taxpayers and 26 of the 36 tax provisions benefiting businesses at the time a tax return is processed. In October, an earlier report by TIGTA identified $636 million in fraudulent or erroneous First-Time Homebuyer Tax Credits, many of which were tied to difficulties in verifying the credits (see Audit Finds $636M in Bogus Homebuyer Credits).

TIGTA noted that the IRS to a great extent relies on taxpayers’ voluntary compliance with tax laws to accurately report income and claim only those tax benefits and credits to which they are entitled. Verifying specific eligibility requirements for the 39 provisions in question would require the IRS to request specific documentation from the taxpayer.

“Since verifying eligibility for Recovery Act benefits would require the IRS to request specific documentation from taxpayers, the IRS relies on taxpayers to accurately report income and claim only those tax benefits and credits to which they are entitled,” said TIGTA Inspector General J. Russell George in a statement.


The tax breaks that are difficult to enforce before processing the return, or through third-party document matching, were redacted from the final report. However, all of the tax provisions would be verifiable through an audit of the taxpayers’ records.